Whither Make In India?
By S Jha
New Delhi: While the cornerstone of ‘Make In India’ campaign has been import substitution of goods which are being imported from China, the trade data for the last financial year may come as a dampener. Far from substituting the imports from China, India is importing record amount of goods from the eastern neighbor and the geo-strategic rival, with the trade deficit against India ballooning to USD 72.9 billion in the last financial year (2021-22).
China despite for at least past six months having been under stringent lockdown in several of its key industrial regions was able to register near 50 percent growth in export to India, reaching the level of the pre-pandemic years. Indian export to China, however, remains stagnant at USD 25.2 billion in 2021-22, which was the same a year before as well. China remains a tough and opaque market for India, for the Indian export overall for the past few months have been on an upswing.
The votaries of ‘Make In India’ may be disappointed for the fact that the burgeoning trade deficit with China is accounted by the imports of electronic components, computer hardware, chemicals among others. The size of the trade deficit could have been much bigger if the supply chains disruptions hadn’t been there, for semi-conductor chips crisis continues.
The rising trade deficit with China, however, proves that the decision of the government to walk out of the Regional Comprehensive Economic Partnership (RCEP) was truly in the national interest. This is for the fact that China and the manufacturing powerhouses in the Asean countries would have got almost duty-free access to the Indian market and flooded with their goods while creating artificial barriers for the Indian exports.
Indian imports from China were to the tune of YSD 94.16 billion, consisting of electrical machinery, equipment, chemicals, electronic parts, etc in 2021-22. The total bilateral trade between India and China stood at USD 115.42 billion.
In contrast, India-US trade is doing much better while being favourable for New Delhi. The US, incidentally, is now the largest trading partner of India, marginally going ahead of China. India-US trade is now worth USD 119.42 billion. The trade surplus in favour of India accounts for USD 32.8 billion.
Economists rightly argue that India should look to trade more with countries, which are transparent in their policies. India-US are inching closer to sign a trade pact, which is likely to significantly raise the prospects for increased bilateral trade.
India-Australia Economic Cooperation and Trade Agreement, inked recently, is likely to give new dimension to the India’s trade policies, with thrust now being bilateral than going with a bloc, which hasn’t given encouraging experiences to the country.
In this backdrop, India’s quick response in joining the US-backed Indo-Pacific Economic Framework, which had 13 countries at the launch in Tokyo, representing 40 per cent of the global Gross Domestic Product (GDP) could prove to be a game-changer of the developed countries begin trusting Indian capabilities to emerge as a reliable source for the resilient global supply chains.
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